The Government’s Role in Aiding Small Business Federal Subcontracting Programs in the United States

Historically, small businesses in the United States have received a share of federal procurement dollars not quite commensurate with their relative importance in the U.S. economy. While 99.7 percent of all employer firms are small, they receive about 23 percent of direct federal procurement dollars and almost 40 percent of subcontracting dollars. While subcontracting has been a part of the federal procurement framework, it has not received the same focus and attention as the prime contracting program. The purpose of the paper is fourfold. First, it discusses the importance of the small business sector to the overall economy. Second, it lays out the policy framework for the federal government’s involvement in requiring “other than small” federal prime contractors to subcontract with small businesses. This policy discussion focuses on the period from 1958 to the present. Third, it examines the legislative and regulatory approaches that have been put forth to increase subcontracting opportunities for small businesses; and fourth, it discusses steps needed to improve the American small business subcontracting program to accommodate greater participation by these businesses in new and emerging global markets.